Soft Power and Institutions on Foreign Direct Investment Inflows in the ASEAN+3 Market: Insights from the COVID-19 Transition

This study examines the combined effects of soft power and institutional determinants on Foreign Direct Investment (FDI) inflows in the ASEAN+3 market during the COVID-19 transition. Using proxy variables such as the soft power index, political stability, government effectiveness, regulatory quality, control of corruption, and the rule of law, data from the World Bank, Worldwide Governance Indicators (WGI), International Institute for Management Development (IMD), Brand Finance, and the ASEAN Secretariat for the years 2019 to 2023 were sourced and analyzed. Employing panel data regression analysis, the results revealed that both soft power and institutional factors such as political stability, government efficiency, and regulatory quality have a significant impact on attracting FDI to the region. This study argues that the positive perceptions and national image cultivated by soft power can foster a conducive business environment and ease FDI decision-making. Institutional factors are crucial drivers that attract FDI by promoting trust and ensuring a favorable business climate. During the COVID-19 transition, investors cautiously prioritize markets with robust soft power and strong institutional frameworks to mitigate risks and seize opportunities. Therefore, ASEAN+3 countries excelling in these areas will be well-positioned to attract and retain FDI more effectively.